Six Priorities for Business and Development
Six strong themes already emerge from the ODI / DFID / BAA Meeting Series on Harnessing the Power of Business for Development Impact. In the three meetings so far (six more to go) discussion ranged from how multinationals can harness their core business to support development, to how the poor can benefit from markets. The evolving agenda demands:
1. Shifts in mindsets;
2. Strategic innovation;
3. Stronger focus on impact;
4. Willingness to take and share risks;
5. New blends of business-development expertise and collaboration; and
6. Practical responses to the economic crisis.
The theme of the meeting series is harnessing core business. It sounds obvious and simple: go beyond useful but limited Corporate Social Responsibility (CSR) contributions because when companies with supply chains the size of M&S, or TUI Travel (the largest tour operator in Europe) roll out improved practice across their supply chains, the development impact can be enormous. Or as national and international businesses develop low-cost products ranging from health care and farm inputs to mobile phones and mobile banking, the potential to benefit the ‘bottom of the pyramid’ through enterprise is clear. Dig a little deeper though, and the obvious becomes more challenging.
Shift in mindsets: in March, practitioners discussed how to make markets work to reach the poor in their millions. Alan Gibson (Springfield Centre) summarised the necessary shift in mindset for development practitioners thus: instead of identifying and trying to solve the problems of the poor, the enterprise approach identifies the problems and why business is not solving them, then changes the market systems so that the development solution becomes a business proposition. An example, from Jon Mitchell (ODI), is the shift from multi-million dollar investments in non-viable community tourism projects, to evidence-based regulatory reform that has unblocked millions of dollars of tourism investment. Business shifts are also needed too. In February, discussing how corporates can move beyond isolated initiatives managed by small numbers of ‘sustainability managers’ to making development impact a core part of business, involving all members of staff. Mike Barry (M&S) argued for business models that are substantially different, but sit comfortably with core business.
Strategic innovation: new approaches must be piloted and adapted in the face of the global economic crisis, but innovation must also be strategic. The Making Markets Work approach highlights the need for systemic change in the structures that shape the market. Tinkering does not deliver solutions at scale. For companies, innovation must relate clearly to the business model and business case. As Graham Baxter (International Business Leaders Forum ) pointed out, risks are high if it does not: forced extensions of business based on public announcements not operational detail, and moves into ‘double step outs’ involving both new business areas and new geographic areas, are prone to failure.
Stronger focus on impact: Vast assumptions are made about the impact of new business models to reduce poverty: that investment of effort in adapting supply chains is worth the return, and compares well with conventional CSR; that BOP products truly reach the poor; that spin-off benefits of an enterprise approach balance out the failures along the way; that business benefits can be sustained. But the actual evidence base - anecdotal and shockingly weak - cannot inform evidence-based decision-making. The business case for intensive assessment of complex impacts appears weak, but public demand for evidence of impact, and the need of businesses for informed decision-making will only grow.
Investment risk: Opting for risk and anticipating a share of failures is normal in business, but not in development. Yet the agenda of harnessing core business for development is a form of ‘venture philanthropy’ – investing development funds in initiatives that may or may not ride the market to scale. Several business speakers have emphasised the risks they have to take, and their expectation that development partners, seeking to encourage their innovation and impact, will share their risks.
Collaboration: In the past, praise for collaboration was not matched by the candid views of those who have tried it: the pace, scale, expectations, and language of business, government and NGO partners are so far apart. Today, however, the most eager proponents of collaboration are those that are engaged in it: SAB Miller reporting on enterprise development; Accenture Development Partnerships reflecting on brokering civil society - corporate partnerships; Oxfam reporting its work facilitating dialogue between business and farmers; M&S drawings the lesson that it’s good to talk to critics as well as collaborators. At the same time, governments and companies in their roles as regulators and competitors need to ask how far the blurring of boundaries should go (to be explored further in the June and September meetings).
Response to the economic crisis: This series began in January as the economic crisis was unfolding. As Ann Grant (Standard Chartered) pointed out, the ‘seismic nature’ of the crisis means we are ‘all working at the very limits of our knowledge’. In such gloomy economic times, the appetite for exploring development contributions of business has been remarkable (waiting lists for every meeting, businesses eager to join the platform) reflecting a genuine interest in exploring long term options. The downside of the crisis is, however, clear. Companies are reining in plans or budgets for CSR, impact assessment, and participation in international partnerships. Several are trimming their core business - operations or investment - in developing countries. Nothing will put the development value of their business into sharper relief, than when it slumps.
But there are silver linings in the crisis. Companies focus harder on levers of core business, not just philanthropy, and on actions that make strategic commercial sense. In the long term this is good for approaches that are innovative, effective, and sustainable. And it may force businesses to look harder at the return on investment to their disparate contributions. The question of ‘what more to do’ may be replaced by ‘what works’? The key question is whether ‘what works’ for business is the same as ‘what works’ for development. Thanks to new technologies, emerging markets, and changing competitive and consumer pressures, examples of synergy are growing. What remains to be seen is whether this ‘crisis of capitalism’ will strengthen the expectations of both public and investors that companies should make a greater contribution to development in poor countries, reinforcing the strategic win-wins.
Post written for Business Fights Poverty by Caroline Ashley, Research Fellow, Overseas Development Institute